SUBMARINE TELECOMS INDUSTRY REPORT – SECTION 7.1: OFFSHORE ENERGY

The offshore energy industry provides its own and separate sub-section of the global submarine fiber industry. Offshore Energy Telecoms is a niche market, but it has become increasingly important as offshore platform operators have started to require higher capacity and more reliable telecommunications systems. This market space is primarily driven by the offshore oil & gas markets and is very closely tied to the price of oil.

7.1.1 Oil Price History

The Brent Crude and West Texas Intermediate (WTI) crude oil grades are the most popularly referenced pricing benchmarks for oil around the world. Brent Crude is a blend of oil extracted from the North Sea while WTI is a blend of several United States domestic oils produced and mixed mainly in the Midwest and Gulf Coast regions. The Brent Crude benchmark is widely used on a global level while the WTI is the main benchmark for oil in the United States.

Figure 62 - WTI and Brent Crude Combined 5-Year Price History, 2014-2019

Figure 62 – WTI and Brent Crude Combined 5-Year Price History, 2014-2019

Looking at the average quarterly price of a barrel of oil via the West Texas Intermediate benchmark, oil prices reached their peak in 2014. Prices soared to well over $105 per barrel during this time. After that, prices sharply declined and finally bottomed out at just over $30 per barrel in Q1 2016. (Figure 62) This steep decline — which started in the latter half of 2014 — is the primary reason 2015 saw few new systems implemented. Ongoing international trade disputes and global regulatory changes have contributed to the relatively stagnant pricing. Many systems either died outright or were pushed back to 2019 and beyond.

7.1.2 System Growth

Over the past five years, system investment has been on an upward trend despite the crash in oil prices around 2014 and due to the industry’s push to employ new technologies. There was a noticeable decrease in new system activity observed in 2017 – this time a likely result of the 2016 price crash – but as prices recovered, 2018 implemented seven systems. No new systems have been implemented so far in 2019 and all previously announced systems for this year are no longer in development. This is likely a result of the price of oil weakening once again and uncertainty surrounding global trade disputes.

Figure 63 - Offshore Oil & Gas Systems per Year, 2017-2022

Figure 63 – Offshore Oil & Gas Systems per Year, 2017-2022

Despite no system activity in 2019, there are plans for several new systems through 2022. (Figure 63) Newly planned systems are larger in scope than have historically been observed. As the Oil & Gas industry embraces new technology and data driven processes, more offshore facilities are being connected than ever before. Systems that would previously have only connected the main hub facility are now branching out to connect secondary platforms so that these advances can be implemented on a larger scale.

There is expected to be over $2.6 billion worth of potential investment in submarine fiber systems through 2022 – more than doubling existing investment amounts. However, as there is currently a high amount of uncertainty and an extremely busy commercial submarine fiber market driven by Over-The-Top (OTT) providers, it is highly likely that some of these planned systems will be delayed past their current RFS date.